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The last three months have been tough on Research Frontiers Incorporated (NASDAQ:REFR) shareholders, who have seen the share price decline a rather worrying 51%. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. In the last three years the share price is up, 88%: better than the market.
Research Frontiers isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over the last three years Research Frontiers has grown its revenue at 0.7% annually. That's not a very high growth rate considering it doesn't make profits. In that time the share price is up 24% per year, which is not unreasonable given the revenue gorwth. Ultimately, the important thing is whether the company is trending to profitability. Given the market doesn't seem too excited about the stock, a closer look at the financial data could pay off, if you can find indications of a stronger growth trend in the future.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Research Frontiers stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Research Frontiers shareholders are down 48% for the year, but the market itself is up 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9.3% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Research Frontiers better, we need to consider many other factors. For instance, we've identified 4 warning signs for Research Frontiers that you should be aware of.
But note: Research Frontiers may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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